Update: SEC Says Ethereum (ETH) and Bitcoin (BTC) Aren’t Securities, But Some ICOs Might Be – What Makes an Asset a Security

SEC

The point man of the Security and Exchange Commission (SEC) on matters of Initial Coin Offerings and digital currencies announced that Ethereum (ETH) and Bitcoin (BTC) are not securities. He said that a lot of Initial Coin Offerings are securities and they will come under the appropriate securities laws and the control of the Security and Exchange Commission.

William Hinman’s Comment

In a speech at the Yahoo All Markets Summit: Crypto conference that held in San Francisco, the head of the Corporation Finance Division at the Security and Exchange Commission – William Hinman said: “how a security is being sold and what purchasers expect from it is central to determining if a security if being sold.”

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Determining Whether an Asset Is A Security or Not

He further added that the fundamental issue in figuring out if Initial Coin Offerings and digital currencies were securities was the expectation of returns by third-parties. Specifically, if there was a group or individual that sponsored the asset’s creation or sale, and those that played a vital role in the maintenance and development of the asset.

For buyers of the digital currency of assets, the key to determining whether the asset is a security is if the buyers are looking for a return on investment. So if buyers are seeking a return on investment and if a centralized third-party is involved, then the asset is likely a security – says Hinman.

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Bitcoin and Ethereum Are Not Centralized

Hinman said that Ethereum and Bitcoin are not securities since they are not centralized – they are both decentralized digital currencies. He said there is no central party involved whose efforts play a major role in the enterprise.

He did not mention anything about the securities status of other digital currencies or Initial Coin Offerings, such as Ripple, which is the subject of a lawsuit claiming that the digital currency is a security.


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